Matthew Stein v. Skatteforvaltningen

Background

Matthew Stein and Jerome Lhote sued Skatteforvaltningen, referred to as SKAT, for allegedly breaching a May 2019 settlement agreement. The complaint asserts that SKAT failed to meet the specific requirements in Section 8(f) of that agreement. Section 8(f) required SKAT to bring the agreement and its terms to the attention of the Danish prosecutor, SØIK, and to state in writing that the agreement reflected good-faith negotiations, that the movants’ cooperation might help SKAT recover additional funds, and that the agreement was in SKAT’s best interests.

The opinion states that SØIK began criminal proceedings against the movants in April 2021 and that those proceedings remained pending. The complaint also sought a declaration that certain affidavits confessing judgment were invalid and unenforceable, but the court said that claim was not involved in the discovery disputes. Luke McGee was a counterclaim-defendant, not a plaintiff in Stein and Lhote’s lawsuit.

Stein, Lhote, and McGee filed three pre-motion letters raising discovery disputes. The court treated those letters as motions because they were lengthy enough to address the issues and the court found the arguments clearly lacked merit. The opinion states that more than thirty document requests had been made, even though document production had not yet begun because the parties had not agreed on a protective order.

Court’s interpretation of the settlement agreement

The movants argued that Section 8(f)’s main purpose was to influence SØIK’s investigation and possibly prevent criminal prosecution. The court rejected that interpretation. It held that Section 8(f) imposed two precise obligations and did not require SKAT to advocate for the movants or seek their non-prosecution. The court also noted that the agreement allowed SKAT to respond truthfully to inquiries from SØIK or another government body under Section 9(c).

The court therefore limited discovery to the breach claim actually pleaded. It stated that the movants could not use discovery in this civil case to obtain information for their criminal case that might not be available there.

Discovery rulings

- Time period for document production: The court found reasonable SKAT’s offer to produce relevant documents from March 2019 through June 2021 because that period meaningfully covered the alleged breach. - Communications with government entities about the settlement agreement: The court denied the request for communications with specified governmental entities other than SØIK, finding that those communications would not bear on the pleaded breach claim. The court also rejected the movants’ reliance on the settlement agreement’s confidentiality and non-disparagement provisions. - Documents from other lawsuits: The court denied requests for documents from other cases brought by SKAT or involving SKAT because they were irrelevant to the pleaded claim and appeared to be an improper way to obtain discovery unavailable in those other proceedings. - SKAT communications with SØIK about the settlement agreement: The court found SKAT’s offer to produce documents related to Section 8(f) entirely reasonable. It directed the parties to a local rule for guidance on the meaning of documents “related to” the provision. The court clarified that it did not intend to prevent disclosure of communications initiated by SKAT that could reasonably be understood to undermine its Section 8(f) obligations. - Communications with SØIK about the criminal proceedings: The court denied this request because it exceeded the breach claim’s scope. It also relied on Section 9(c), which expressly allowed SKAT to respond truthfully to SØIK’s inquiries, and on the fact that the movants were criminal defendants in the pending proceedings. - Communications about Section 2(c) of the settlement agreement: The court denied this request. It said the communications should already have been in the plaintiffs’ custody or control, were outside the pleadings, and were irrelevant to the breach claim. It also found no showing that Section 2(c) was ambiguous enough to justify investigating the parties’ intent. - People with knowledge of the settlement agreement: The court said SKAT’s identification of two individuals, along with its representation that document production would identify additional names, appeared sufficient. It allowed the issue to be raised again if the information ultimately proved insufficient and the parties could not resolve the disagreement. - Communications with the press: The court denied requests for documents and information about SKAT’s communications with the press because they were irrelevant to the claim before the court.

Disposition

The court stated that, except as noted in its rulings, the movants’ discovery motions were denied. It directed the Clerk of Court to terminate the motions pending at ECF Nos. 73, 74, and 75. Judge Naomi Reice Buchwald issued the memorandum and order on February 1, 2024.